Why Bad Directors Aren't Thrown Out 205
An anonymous reader writes "For publicly-owned companies, the CEO gets most of the spotlight. If the company is successful and the stock goes up, the CEO gets the credit. If the company stumbles, the CEO gets the blame. But an article at the NY Times points how the board of directors for most companies seem to get a free pass, even when their decisions or their CEO selections consistently go wrong. 'Last year, there were elections for 17,081 director nominees at United States corporations, according to the service. Only 61 of those nominees, or 0.36 percent, failed to get majority support. More than 86 percent of directors received 90 percent or more of the votes. Of the 61 directors who failed to get majority approval, only six actually stepped down or were asked to resign. Fifty-one are still in place, as of the most recent proxy filings.' The article uses Hewlett-Packard as an example; the past several years have seen poor CEO choices, the abominable Autonomy acquisition, and billions in write-offs for other failed endeavors. Yet HP's directors were all re-elected."
Simple solution (Score:5, Informative)
Of the 61 directors who failed to get majority approval, only six actually stepped down or were asked to resign. Fifty-one are still in place, as of the most recent proxy filings.
61 - ( 51 + 6 ) = 4
The other four were dragged out and burned at the stake by irate shareholders. Encourage this response and I'm certain the other BoD members will straighten their acts out. You only need to make a few examples.
Re:The reason why there are bad directors (Score:5, Informative)
The reason is blame taking is the CEO's real job.
CEOs at big companies often have very short tenures; and no even abject failures are not necessarily career enders. It really comes down to investor perceptions. If the company is/was a mess to start with or the objective (I'll get to that) is thought to have not made any sense; they usually go on to other things without much trouble. Yes the existing board and management always blame the departing CEO for their ills if things are not great because lets face it, if you have to assign blame who better than they guy/gal who isn't there anymore? This works well because blaming the CEO (even if completely undeserved) is credible enough to protect the company and its board from share holder legal actions or votes that might require other board-members or management to be removed.
Often CEO's will be moving on to "pursue other interests", "spend time with families", etc almost regardless of success or failure and almost always with a giant cash payout. Sure companies that are experiencing really good time might bring in a care taker CEO that hangs on longer; and sometimes you have founding father type CEO (Jobs for example), but most are brought in to effect some thing, they have demonstrated they can do in the past. Maybe its move the target demographic for the product, major re-branding, off shoring efforts; but something along those lines. They can either do it or they can't. At the end of the 18-24 months its time for them to go; even if they are successful as being good at getting one of those projects that sucks up an entire corporations' focus and doing day to day well after the dust settles are different skills and its rare one guy has both.
Re:The Big Lie (Score:5, Informative)
Warren Buffet is the son of a four-term congressman who owned a stock brokerage and gave him his first job. He graduated high school in Washington, DC while his father was a sitting member of congress, then was promptly enrolled at U. Penn to study business.
Please stop spreading this "started from nothing" bullshit. It is a myth.